Seems like everyone has an idea on how to save Atlantic City. The problem is no one is sure if any of them will work.
In the past week, New Jersey Senate president Stephen Sweeney proposed allowing new casino construction in northern New Jersey and envisioned the creation of a non-profit board comprised of top business leaders to redirect some of that new casino revenue into Atlantic City.
But several southern New Jersey politicians remain strongly opposed to casino expansion in the state—at least until 2016—and want Atlantic City to continue its five-year plan started in 2011 to rebuild itself as a destination resort.
Meanwhile, a scramble is on the save more than 6,500 jobs threatened by the imminent closing of three of the city’s 11 casinos at the end of the summer.
One of those casinos has attracted the interest of several buyers and could be sold at a bankruptcy auction next month. But the other two—Showboat casino and Trump Plaza—are still looking at late summer closings.
And through it all, city officials keep pointing out that non-casino revenue in the city is on the rise and the city must keep diversifying its tourist attractions.
The uncertain fate of the city has brought out a glut of national media coverage focusing on the threats to the city and casino employees threatened with losing their jobs. The city is also facing the prospect of having four closed casino towers lining its Boardwalk, at least in the short term.
Most of the national coverage has been pessimistic, but in all the speculation, some actual developments have been happening.
Sweeney’s proposal shows that for many politicians, the five-year moratorium on allowing casinos outside of Atlantic City is too long. The five years were granted by Governor Chris Christie when the state created a tourism district in the city in 2011, but never carried the weight of law.
Sweeney—who supported the moratorium—has said that as Atlantic City’s fortunes have continued to decline, it may be time to start talking about new casinos in the northern part of the state.
Speaking to the editorial board of the Philadelphia Inquirer, Sweeney said last week that he envisions creating a nonprofit board composed of top business leaders that would reinvest gaming revenue from those potential casinos into Atlantic City.
The proposed board would include “business people that know how to make business happen, not government,” Sweeney said, though he acknowledged that he knows of no model for such a board.
“I just don’t want to give money to government, because I know what they do with it,” Sweeney, told the paper.
Sweeney’s statements come as a new proposal to build a $4.6 billion casino entertainment complex in Jersey City was announced this month. The proposal comes from a group led by Paul Fireman, founder of Reebok International, and includes a 95-story tower, the world’s largest Ferris wheel and an auto-racing stadium.
That proposal has led to state Senator Raymond Lesniak introducing a bill in the legislature to allow for the construction of the project and a second casino, presumably at the Meadowlands Sports Complex.
Any expansion of casino gambling outside of Atlantic City would require approval by state voters. Lesniak has been pushing for a referendum in November, but has acknowledged that time is running out for a referendum this year and the issue will probably go before voters in November 2015.
Sweeney has also said he expects a referendum in 2015.
Lesniak’s bill would provide $100 million a year to Atlantic City to help revitalize the resort, but Sweeney said that figure is too low.
Most state officials agree that Atlantic City—which has been sending casino revenue throughout the state for decades—needs to benefit from any casino construction.
Governor Christie told reporters earlier this month “any expansion of gaming to other parts of the state would have to have, as an element to that plan, how that gaming will help the folks in Atlantic City.”
Meanwhile, there was some hope in the resort that not all three of the casinos threatened with closure would actually close.
Speaking at a press conference, Atlantic City Mayor Don Guardian said there are “a half a dozen individual companies that are looking at Revel to purchase” and ”several companies that are looking both at Atlantic Club and Showboat Casino as well.”
The Atlantic Club casino was closed in January, and was subsequently bought by TJM Properties, a Florida real estate firm that has reopened the Claridge as a non-casino hotel. Guardian says he’s been in contact with TJM about selling the Claridge to another party. Some believe that could be Richard Stockton College, a state college based near Atlantic City, for a Boardwalk campus. The property was recently sold by Caesars Entertainment with a deed restriction prohibiting it from operating as a casino.
Among those rumored to be interested in the Revel property are Caesars Entertainment, the Florida Seminole Indians with their Hard Rock brand, Landry’s Inc., which owns the Golden Nugget, and Tropicana-owner Carl Icahn.
Guardian also said Showboat has potential buyers, but did not say how many. It has been rumored that Showboat had attracted the interest of both Penn National Gaming and Churchill Downs, which was more interested in the entry to online gaming than operating a property in Atlantic City. Guardian said he did not know of any potential buyers for Trump Plaza, according to the Associated Press. But Trump Plaza had been sold last year to the Meruelo Group of San Diego, which owns and operates the Grand Sierra in Reno and some smaller hotels in Downtown Las Vegas. But Tropicana owner Carl Icahn, who owns the mortgage on Trump Plaza (along with Trump Taj Mahal), refused to allow the sale to go through. It is thought that Icahn must also approve the closing of Trump Plaza.
Closing Delay
Meanwhile, three of Atlantic City’s state legislators are trying to keep the Trump Plaza casino and Showboat casino open for four months while their casino companies look for new buyers.
The three legislators—State Senator James Whelan and Assemblymen Vince Mazzeo and Chris Brown—have asked the state Casino Control Commission to delay the closings.
Caesars Entertainment announced it was closing the Showboat at the end of August to lessen the casino saturation in the city and protect its other three Atlantic City casinos. However, Caesars officials later said they are entertaining offers for the property and would consider selling it to another casino company.
Later, Trump Plaza—the city’s weakest casino—announced it would close September 16. Officials said the casino is also seeking a buyer.
The Revel casino is also in danger of closing and is holding a bankruptcy auction next month. All three casinos gave employee two months’ notice of the potential closings, endangering nearly 7,000 jobs.
In their letter, the three legislators said the short notice sent “to many 20-plus-year employees is wrong and unrealistic.”
“Given the complexities of the situation here in Atlantic City, this two-month timeframe is simply not enough time for potential buyers to do the appropriate research that acquisition of either property may require,” they wrote in a letter to commission chairman Matthew Levinson.
The letter charged that the casino’s owners are simply looking to protect their interests and that the closures would be a disaster for the city.
They also objected to any sales that include deed restrictions to keep properties from operating as casinos.
Levinson said the CCC is studying th
e request and determining whether it has the power to delay the closings.
“I certainly share the very serious concerns they raised about the welfare of workers and all of the businesses that will suffer if casino properties close their doors,” Levinson said in a press release. “While our authority is broad in some respects, and our ability to direct business decisions of the casinos is limited under the Casino Control Act, the current circumstances are unprecedented and present novel issues which we have been and will continue to review.”
The three casinos that could close at by mid-September will mean more than 6,000 workers will lose their jobs. Another 1,600 lost jobs when the Atlantic Club casino closed in January,
The city’s casinos account for half its jobs: 5,883 positions in a workforce of 13,500—not all casino employees live in the city.
To help lessen the pain, local county government is gearing up for an onslaught of laid off employees as three Atlantic City casinos face closure in the next few weeks.
The closings could come August 18 for 3,286 Revel employees; August 31 for 2,139 Showboat employees; and September 16 for 1,153 Trump Plaza employees.
The Atlantic Cape May Workforce Investment Board will work with Showboat Atlantic City and the state’s Rapid Response team to advise Showboat employees about employment programs such as unemployment compensation benefits and their rights to wages, severance and benefits related to termination, Atlantic County officials said.
The board is also working with Caesars Entertainment—Showboat’s owner—to create job fairs for casino workers.
As of yet, however, the board has not been working with Revel and Trump Plaza, officials said, but is planning to offer the same services.
Representatives from Atlantic Cape Community College—Atlantic County’s junior college—also plan to send representatives from the college’s admissions, recruitment, and continuing education departments to address Showboat about Atlantic Cape’s credit programs and training opportunities.
Credit Cut
And in another serious blow, Moody’s Investors Services has cut Atlantic City’s credit rating by two levels as the city continues an economic decline and faces severely reduced casino tax revenue.
The reduction to Ba1 from Baa2 on the city’s $245 million of general-obligation debt is the result of the city’s weakened tax base and the potential for more casino closings.
“The downgrade to Ba1 reflects the city’s significantly weakened tax base, revenue-raising ability and broader economic outlook,” analysts Vito Galluccio and Julie Beglin said in a statement. “These result from ongoing casino revenue declines, expected near-term casino closures, and the impact of sizable casino tax appeals, all of which has stemmed from increased competition from casinos in neighboring states.”
Competition from casinos in other states has caused casino revenue in the city to drop for seven straight years, falling to $2.86 billion last year from a high of $5.07 billion in 2006.
The gloomy outlook for the resort also caused Forbes to rank the city last among the nation’s 200 largest metro areas in terms of business climate.
